Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
December 22, 2014 12:00 AM

European agency seeks more disclosure of soft dollars

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    The European Securities and Markets Authority is demanding greater transparency and disclosure in the way money managers use client commissions to pay for research from brokers.

    In its final technical advice published Dec. 19, ESMA presented an updated version of its proposals for Markets in Financial Instruments Directive II, which took into account industry responses to a consultation paper published in May.

    The majority of respondents to the May paper disagreed with ESMA’s proposal of treating investment research payment as an inducement. “Several respondents argued that the ESMA proposal could lead to a number of unintended consequences: massive increase of costs for active managers in the EU and competitive disadvantage of smaller asset managers and raising barriers to entry for new asset managers,” ESMA said in its new technical advice.

    Money managers will continue to be able to pay for third-party research out of commissions, but “only where they pay for it directly or from a ring-fenced research account that is funded by a specific charge to their clients,” subject to certain conditions, said the ESMA paper. “The proposal makes clear that there should be no payment for third-party research linked to the payments made for execution of orders. This will address the potential inducements and conflict-of-interest issues that currently exist for portfolio managers when they receive third-party research linked to execution arrangements with the broker.”

    ESMA’s proposal has been welcomed by the industry.

    “There has been a change in (ESMA’s) position — the original position would have made it uneconomic for fund managers to continue to buy any research through dealing commissions,” said Daniel Godfrey, CEO at the Investment Management Association, a trade body representing U.K. money managers, in a telephone interview. “What they have done is, at first glance, appear to have built a very controlled regime to manage the current conflicts of interest,” rather than breaking down the existing system.

    “(ESMA) is saying that fund managers may continue to pay for research but only under very controlled circumstances, or they pay for the research themselves,” Mr. Godfrey said. Controls include advance agreements, budgets that are set by senior executives, and that clients be charged separately for investment research. “That is quite a big set of changes,” he said.

    The proposals are designed to manage conflicts of interest, mainly between clients, Mr. Godfrey said, “to make sure that each individual fund or client is getting value for the money they spend on research, and are not inadvertently cross-subsidizing other clients.”

    Related Articles
    Change in U.K. rules could lead to job changes for analysts
    Trading Costs Are Very Real - Perspectives for Global Equity Investors
    EU threat of soft-dollar ban still alive, raising questions for managers
    Managers bemoan absence of EU 'passport'
    European agency seeking comment on reducing collateral in derivatives trades
    Recommended for You
    Advisors Asset Management brings on head of institutional and alternatives
    Northern Trust appoints global head of digital assets and financial markets group
    terminated_stamp_1550-main_i.jpg
    American Beacon to terminate 3 subadvisers, close midcap value fund
    An Active Approach to US Mid-Cap Equities for DC Plans
    Sponsored Content: An Active Approach to US Mid-Cap Equities for DC Plans

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit